Kinston officials seek restoration of state funds

Published: Monday, November 12, 2012 at 08:21 PM.

Kinston leaders are working to restore a much-needed stream of state funding, which expired this year after a decade of supporting counties and municipalities.

“Our first order of business is to have individual meetings with our delegation in the (N.C.) House and Senate to discuss Kinston-specific issues, with this being one of our main focal points,” Mayor B.J. Murphy said Monday.

The General Assembly did not take up legislation during its 2012 short session which would have extended annual “transitional hold harmless” allocations that expired this year, and it could leave Kinston short by half a million dollars when it puts its budget together next year.

The allocations were enacted by the Legislature in 2002 to help communities make up the loss of shared revenue from a tax on business inventory, which had been repealed.

Counties and cities could establish a local option sales tax, and the state would help them make up any difference with transitional hold harmless payments every year for 10 years.

“The thought was in 2002 when you got to 2012 that the revenue from the local option sales tax would be more than what the original revenue source would have been, and I think we were well underway to do that,” City Manager Tony Sears told the members of the Kinston City Council recently. “I think, given the state of the economy in the ’90s and the early 2000s, that that was believable.”

The state of North Carolina’s and the national economy during the past four to five years has made it difficult for many communities to make up the difference, though, including Kinston.

Kinston leaders are working to restore a much-needed stream of state funding, which expired this year after a decade of supporting counties and municipalities.

“Our first order of business is to have individual meetings with our delegation in the (N.C.) House and Senate to discuss Kinston-specific issues, with this being one of our main focal points,” Mayor B.J. Murphy said Monday.

The General Assembly did not take up legislation during its 2012 short session which would have extended annual “transitional hold harmless” allocations that expired this year, and it could leave Kinston short by half a million dollars when it puts its budget together next year.

The allocations were enacted by the Legislature in 2002 to help communities make up the loss of shared revenue from a tax on business inventory, which had been repealed.

Counties and cities could establish a local option sales tax, and the state would help them make up any difference with transitional hold harmless payments every year for 10 years.

“The thought was in 2002 when you got to 2012 that the revenue from the local option sales tax would be more than what the original revenue source would have been, and I think we were well underway to do that,” City Manager Tony Sears told the members of the Kinston City Council recently. “I think, given the state of the economy in the ’90s and the early 2000s, that that was believable.”

The state of North Carolina’s and the national economy during the past four to five years has made it difficult for many communities to make up the difference, though, including Kinston.

“We haven’t received the gains that we thought we were going to get from the local options sales tax,” Sears said.

The city manager told the council the city would be without a traditional $509,000 hold harmless payment when the budget for the 2013-2014 fiscal year is put together next year.

The hold harmless money supports the city’s $21.4 million general fund, about a fifth of the city’s adopted $99.4 million budget for 2012-2013.

“About half a million of that could be impacted by this one action of the General Assembly,” Murphy said.

The City Council voted unanimously last week to send a resolution to the N.C. League of Municipalities urging it to “make restoration of the ‘transitional hold harmless’ payment one of its highest legislative goals in the 2013 Session of the General Assembly.”

Losing hold harmless payments would affect 122 municipalities and 17 counties in North Carolina, according to the resolution.

The mayor said he and other city leaders plan to meet with the members of Lenoir County’s legislative delegation — which has a host of new faces thanks to statewide redistricting and this month’s election — during the weeks and months preceding the beginning of the 2013 legislative session early next year.

Lenoir County Manager Mike Jarman said the county does not receive a hold harmless payment because the state took over the burden of administering its Medicaid program in 2007 — along with a portion of sales tax funds which would support county administration of Medicaid.

Jarman said Medicaid cost the county much more than $500,000 to administer each year.

“We’re better off losing the sales tax and not having to pay the Medicaid burden,” he said.

David Anderson can be reached at 252-559-1077 or David.Anderson@Kinston.com. Follow him on Twitter at DavidFreePress.